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Australia's Wesfarmers considers Homebase exit as up to 40 stores slated for closure

Australia’s Wesfarmers today reported a A$1bn writedown on its UK and Ireland DIY business Homebase, which it bought for A$705m two years ago, saying it would close 20 to 40 stores and was considering exiting the business.

Homebase employs about 12,000 staff in 250 stores in the UK and Ireland.

Wesfarmers has been in the process of rolling out its Bunnings DIY brand across Homebase’s stores and has so far rebranded 19 Bunnings at a cost of £50m. It has £1bn in outstanding lease liabilities on Homebase stores.

Rob Scott, Wesfarmers managing director, said the group would consider selling the business as part of a major review but said this was the least preferred option.

“We now have a team that understands the UK market, we have a number of opportunities to improve performance and that is what we are very much focused on. But all options are open.”

"The Homebase acquisition has been below our expectations which is obviously disappointing,” he added. "In light of this, a review of Bunnings UK has commenced to identify the actions required to improve shareholder returns.”

Shares in Wesfarmers fell 4.5% to A$42.16 on Monday on the news.

Wesfarmers said Bunnings UK and Ireland would report an underlying loss before tax and interest of £97m for the first half of 2018. It is taking a £454m non-cash impairment before tax to be recorded against goodwill recognised on the Homebase acquisition.

It is writing down the value of unsuitable stock by £37m and writing down deferred tax assets worth £53m. The group also announced a management shake-up in the UK.